This document discusses key aspects of the income statement and related reporting issues. It covers the format and elements of the income statement, including revenues, expenses, gains and losses. It explains how items are reported within the income statement, such as gross profit, income from operations, and net income. The document also discusses reporting requirements for unusual items, discontinued operations, earnings per share, and allocation to non-controlling interests. Learning objectives cover understanding the uses and limitations of the income statement, its content and format, and how to prepare and explain the reporting of items in the statement.
An Income Statement of a company is a financial statement that shows the company’s revenues and expenses during a specific accounting period. This statement reports the financial performance of the company. Copy the link given below and paste it in new browser window to get more information on Income Statement:- www.transtutors.com/homework-help/finance/income-statement.aspx
The income statement shows a company's revenues and expenses over a period of time. It displays items such as sales, costs, expenses, and net income. For Example Company, net income increased from $12 in 2010 to $32 in 2011 as revenues grew from $100 to $130 while expenses rose at a slower rate from $88 to $98. The income statement is used to analyze a company's performance and profitability.
This document provides an overview of key learning objectives and concepts to be covered in a chapter on income statements and related information. The chapter will cover understanding the uses and limitations of income statements, their content and format, how to prepare them, and how to report various items. It will also cover earnings per share information, intraperiod tax allocation, accounting changes and errors, retained earnings statements, and other comprehensive income. The document outlines these learning objectives and concepts through a series of slides, providing definitions, examples, and illustrations.
Ch02-conceptual framework or financial reportingVivi Tazkia
The document provides an overview and learning objectives for a chapter on the conceptual framework for financial reporting. It discusses the need for a conceptual framework to establish consistent concepts to underlie financial reporting standards. It describes efforts to construct a conceptual framework, which comprises chapters on the objective of financial reporting, qualitative characteristics of accounting information, and basic concepts related to recognition, measurement and disclosure. The chapter objectives cover understanding the usefulness of the conceptual framework, its development, the financial reporting objective, qualitative characteristics, basic elements of financial statements, accounting assumptions, and how the cost constraint affects reporting.
The document discusses the statement of financial position, statement of changes in equity, and statement of cash flows. It covers the major classifications of the statement of financial position including current and non-current assets such as cash, receivables, inventories, long-term investments, property, plant and equipment, and intangible assets. The learning objectives are to explain the uses and limitations of the statement of financial position, identify the classifications, and prepare basic statements of changes in equity and cash flows.
An Income Statement of a company is a financial statement that shows the company’s revenues and expenses during a specific accounting period. This statement reports the financial performance of the company. Copy the link given below and paste it in new browser window to get more information on Income Statement:- www.transtutors.com/homework-help/finance/income-statement.aspx
The income statement shows a company's revenues and expenses over a period of time. It displays items such as sales, costs, expenses, and net income. For Example Company, net income increased from $12 in 2010 to $32 in 2011 as revenues grew from $100 to $130 while expenses rose at a slower rate from $88 to $98. The income statement is used to analyze a company's performance and profitability.
This document provides an overview of key learning objectives and concepts to be covered in a chapter on income statements and related information. The chapter will cover understanding the uses and limitations of income statements, their content and format, how to prepare them, and how to report various items. It will also cover earnings per share information, intraperiod tax allocation, accounting changes and errors, retained earnings statements, and other comprehensive income. The document outlines these learning objectives and concepts through a series of slides, providing definitions, examples, and illustrations.
Ch02-conceptual framework or financial reportingVivi Tazkia
The document provides an overview and learning objectives for a chapter on the conceptual framework for financial reporting. It discusses the need for a conceptual framework to establish consistent concepts to underlie financial reporting standards. It describes efforts to construct a conceptual framework, which comprises chapters on the objective of financial reporting, qualitative characteristics of accounting information, and basic concepts related to recognition, measurement and disclosure. The chapter objectives cover understanding the usefulness of the conceptual framework, its development, the financial reporting objective, qualitative characteristics, basic elements of financial statements, accounting assumptions, and how the cost constraint affects reporting.
The document discusses the statement of financial position, statement of changes in equity, and statement of cash flows. It covers the major classifications of the statement of financial position including current and non-current assets such as cash, receivables, inventories, long-term investments, property, plant and equipment, and intangible assets. The learning objectives are to explain the uses and limitations of the statement of financial position, identify the classifications, and prepare basic statements of changes in equity and cash flows.
The document discusses accounting for intangible assets such as goodwill, patents, trademarks, and research and development costs. It describes characteristics of intangible assets, how to value and amortize them, types of intangibles including goodwill, procedures for recording goodwill, accounting for impairment of intangibles, conceptual issues and accounting treatment for research and development costs.
Kerangka Konseptual menetapkan konsep dasar pelaporan keuangan yang terdiri dari tujuan pelaporan, karakteristik kualitatif informasi, dan unsur-unsur laporan keuangan. IASB dan FASB sedang mengembangkan kerangka kerja konseptual bersama untuk menyatukan kerangka kerja masing-masing."
Valuation of Inventories: A Cost-Basis Approachreskino1
Describe inventory classifications and different inventory systems.
Identify the goods and costs included in inventory.
Compare the cost flow assumptions used to account for inventories.
Determine the effects of inventory errors on the financial statements.
Ch03-financial reporting and accounting standardsVivi Tazkia
The document provides an overview of the key concepts and steps covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. It outlines 8 learning objectives for the chapter, which include understanding basic accounting terminology, the double-entry system, the accounting cycle, journalizing and posting transactions, adjusting entries, and preparing financial statements. The chapter also discusses the accounting equation, T-accounts, the different types of accounts, and the accounting process from recording transactions to the adjusted trial balance.
Adjusting entries bring account balances up to date at the end of an accounting period by recording changes that have not been entered in the accounting records, such as items that have been deferred or accrued. Adjusting entries are necessary when using accrual basis accounting to adhere to the matching principle. Adjusting entries are internal transactions that do not have a source document and involve at least one income statement and one balance sheet account, but do not affect the cash account.
An income statement is used to calculate and report two measures of profit and consists of two parts.An income statement is used to calculate and report two measures of profit and consists of two parts.
After studying this chapter, you should be able to:
1. Discuss the characteristics, valuation, and amortization of intangible assets.
2. Describe the accounting for various types of intangible assets.
3. Explain the accounting issues for recording goodwill.
4. Identify impairment procedures and presentation requirements for intangible assets.
5. Describe the accounting and presentation for research and development and similar costs.
(a) 1% of net sales:
Net credit sales = $750,000
Bad debt expense = 1% x $750,000 = $7,500
Bad Debt Expense 37,500
Allowance for Doubtful Accounts 37,500
(b) 5% of accounts receivable:
Accounts receivable = $750,000
Bad debt expense = 5% x $750,000 = $37,500
LO 5
7-47
1. Identify items considered cash.
2. Indicate how to report cash and related items.
3. Define receivables and identify the different
types of receivables.
4. Explain accounting issues
This document provides an overview of accounting for liabilities. It begins by defining current liabilities and identifying major types like accounts payable, notes payable, unearned revenue, and accrued expenses. It then discusses accounting for notes payable, including example journal entries. The document also explains accounting for other current liabilities like sales tax payable and unearned revenue. It concludes by covering non-current liabilities such as bonds, including why companies issue bonds, types of bonds, accounting for bond issuances and redemptions, and accounting for long-term notes payable.
The document provides an overview of the development of accounting principles and professional practice. It discusses how the environment of accounting has evolved over time to meet changing demands and influences. Three key influences are: 1) recognizing scarce resources, 2) current concepts of property rights and equity, and 3) measuring information for absentee investors. The document also describes the objectives of financial reporting, key qualitative characteristics of accounting information, elements of financial statements, and basic principles of accounting including measurement, revenue/expense recognition, and full disclosure.
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
This document provides an overview of the key learning objectives and content to be covered in a chapter on income statements and related information. The chapter will cover understanding the uses and limitations of income statements, their required components and format, how to prepare them, and how to report various items within the statement. It will also cover earnings per share calculations and the reporting of discontinued operations, accounting changes, errors and other comprehensive income. The document outlines the chapter's objectives and provides examples to illustrate important concepts related to income statement preparation and components.
Bab 4 Income Statement and Related Informationmsahuleka
The document discusses key elements and objectives related to preparing and understanding income statements, including:
- The uses and limitations of income statements in evaluating past performance and predicting future cash flows
- Components of single-step and multiple-step income statements and how they differ
- Reporting of irregular items like discontinued operations, extraordinary items, and changes in accounting principles
- Intraperiod tax allocation and where earnings per share information is reported
Kieso Ch02 Conceptual Framework for Financing ReportingAhmad Rudi
The document provides an overview of the conceptual framework for financial reporting. It discusses the need for a conceptual framework, the efforts to develop one jointly by the IASB and FASB, and the structure and key components of the conceptual framework. The conceptual framework establishes the fundamental concepts that guide financial reporting standards. It includes objectives, qualitative characteristics, elements, assumptions, principles, and constraints of financial reporting.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
The document discusses accounting issues related to cash, accounts receivable, and uncollectible accounts receivable. It defines cash and receivables, identifies different types of receivables, and explains recognition and valuation of receivables including estimation of uncollectible amounts using percentage-of-sales and percentage-of-receivables approaches. It also covers presentation of receivables on the statement of financial position and journal entries related to receivables transactions.
This document discusses key concepts related to income statements, including:
- The income statement is useful for assessing risk and future cash flows. It reports net income over a period of time using either a single-step or multiple-step format.
- Items in the income statement help evaluate past performance and provide a basis for predicting future earnings and cash flows. Limitations include unreliable measurements and judgment in income determination.
- Earnings management, discontinued operations, extraordinary items, comprehensive income and retained earnings are also addressed.
This document contains information about an upcoming presentation on financial statements. It lists the names and roll numbers of 7 presenters and the topics they will cover, including an overview of financial statements, the income statement, its purpose, components and limitations. It provides examples of the components of an income statement, such as revenue, expenses, net income. It concludes by listing an actual income statement from Wipro's 2014-15 annual report.
The document discusses accounting for intangible assets such as goodwill, patents, trademarks, and research and development costs. It describes characteristics of intangible assets, how to value and amortize them, types of intangibles including goodwill, procedures for recording goodwill, accounting for impairment of intangibles, conceptual issues and accounting treatment for research and development costs.
Kerangka Konseptual menetapkan konsep dasar pelaporan keuangan yang terdiri dari tujuan pelaporan, karakteristik kualitatif informasi, dan unsur-unsur laporan keuangan. IASB dan FASB sedang mengembangkan kerangka kerja konseptual bersama untuk menyatukan kerangka kerja masing-masing."
Valuation of Inventories: A Cost-Basis Approachreskino1
Describe inventory classifications and different inventory systems.
Identify the goods and costs included in inventory.
Compare the cost flow assumptions used to account for inventories.
Determine the effects of inventory errors on the financial statements.
Ch03-financial reporting and accounting standardsVivi Tazkia
The document provides an overview of the key concepts and steps covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. It outlines 8 learning objectives for the chapter, which include understanding basic accounting terminology, the double-entry system, the accounting cycle, journalizing and posting transactions, adjusting entries, and preparing financial statements. The chapter also discusses the accounting equation, T-accounts, the different types of accounts, and the accounting process from recording transactions to the adjusted trial balance.
Adjusting entries bring account balances up to date at the end of an accounting period by recording changes that have not been entered in the accounting records, such as items that have been deferred or accrued. Adjusting entries are necessary when using accrual basis accounting to adhere to the matching principle. Adjusting entries are internal transactions that do not have a source document and involve at least one income statement and one balance sheet account, but do not affect the cash account.
An income statement is used to calculate and report two measures of profit and consists of two parts.An income statement is used to calculate and report two measures of profit and consists of two parts.
After studying this chapter, you should be able to:
1. Discuss the characteristics, valuation, and amortization of intangible assets.
2. Describe the accounting for various types of intangible assets.
3. Explain the accounting issues for recording goodwill.
4. Identify impairment procedures and presentation requirements for intangible assets.
5. Describe the accounting and presentation for research and development and similar costs.
(a) 1% of net sales:
Net credit sales = $750,000
Bad debt expense = 1% x $750,000 = $7,500
Bad Debt Expense 37,500
Allowance for Doubtful Accounts 37,500
(b) 5% of accounts receivable:
Accounts receivable = $750,000
Bad debt expense = 5% x $750,000 = $37,500
LO 5
7-47
1. Identify items considered cash.
2. Indicate how to report cash and related items.
3. Define receivables and identify the different
types of receivables.
4. Explain accounting issues
This document provides an overview of accounting for liabilities. It begins by defining current liabilities and identifying major types like accounts payable, notes payable, unearned revenue, and accrued expenses. It then discusses accounting for notes payable, including example journal entries. The document also explains accounting for other current liabilities like sales tax payable and unearned revenue. It concludes by covering non-current liabilities such as bonds, including why companies issue bonds, types of bonds, accounting for bond issuances and redemptions, and accounting for long-term notes payable.
The document provides an overview of the development of accounting principles and professional practice. It discusses how the environment of accounting has evolved over time to meet changing demands and influences. Three key influences are: 1) recognizing scarce resources, 2) current concepts of property rights and equity, and 3) measuring information for absentee investors. The document also describes the objectives of financial reporting, key qualitative characteristics of accounting information, elements of financial statements, and basic principles of accounting including measurement, revenue/expense recognition, and full disclosure.
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
This document provides an overview of the key learning objectives and content to be covered in a chapter on income statements and related information. The chapter will cover understanding the uses and limitations of income statements, their required components and format, how to prepare them, and how to report various items within the statement. It will also cover earnings per share calculations and the reporting of discontinued operations, accounting changes, errors and other comprehensive income. The document outlines the chapter's objectives and provides examples to illustrate important concepts related to income statement preparation and components.
Bab 4 Income Statement and Related Informationmsahuleka
The document discusses key elements and objectives related to preparing and understanding income statements, including:
- The uses and limitations of income statements in evaluating past performance and predicting future cash flows
- Components of single-step and multiple-step income statements and how they differ
- Reporting of irregular items like discontinued operations, extraordinary items, and changes in accounting principles
- Intraperiod tax allocation and where earnings per share information is reported
Kieso Ch02 Conceptual Framework for Financing ReportingAhmad Rudi
The document provides an overview of the conceptual framework for financial reporting. It discusses the need for a conceptual framework, the efforts to develop one jointly by the IASB and FASB, and the structure and key components of the conceptual framework. The conceptual framework establishes the fundamental concepts that guide financial reporting standards. It includes objectives, qualitative characteristics, elements, assumptions, principles, and constraints of financial reporting.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
The document discusses accounting issues related to cash, accounts receivable, and uncollectible accounts receivable. It defines cash and receivables, identifies different types of receivables, and explains recognition and valuation of receivables including estimation of uncollectible amounts using percentage-of-sales and percentage-of-receivables approaches. It also covers presentation of receivables on the statement of financial position and journal entries related to receivables transactions.
This document discusses key concepts related to income statements, including:
- The income statement is useful for assessing risk and future cash flows. It reports net income over a period of time using either a single-step or multiple-step format.
- Items in the income statement help evaluate past performance and provide a basis for predicting future earnings and cash flows. Limitations include unreliable measurements and judgment in income determination.
- Earnings management, discontinued operations, extraordinary items, comprehensive income and retained earnings are also addressed.
This document contains information about an upcoming presentation on financial statements. It lists the names and roll numbers of 7 presenters and the topics they will cover, including an overview of financial statements, the income statement, its purpose, components and limitations. It provides examples of the components of an income statement, such as revenue, expenses, net income. It concludes by listing an actual income statement from Wipro's 2014-15 annual report.
The document discusses different types of income statements, including single-step and multiple-step income statements. A single-step income statement presents revenues and expenses in broad categories, while a multiple-step income statement distinguishes operating activities from non-operating activities. The document also defines irregular items reported on an income statement such as discontinued operations, extraordinary items, and changes in accounting principles.
The document discusses income statements and balance sheets. It defines an income statement as presenting a company's revenues, expenses and profits over a period of time, focusing on revenues and costs associated with revenues. It defines a balance sheet as summarizing a company's assets, liabilities, and shareholders' equity at a point in time, showing the relationship that assets equal liabilities plus owners' equity. It provides examples of components and formats for both financial statements.
This document discusses key financial statements including the balance sheet, income statement, and statement of cash flows. It provides examples of each statement for a sample company in 2002 and 2001. The balance sheet shows a company's assets, liabilities, and equity at a point in time. The income statement summarizes revenues and expenses over a period of time. The statement of cash flows reports how a company's activities affected cash flow over a given period.
An introduction to the three main financial statements using a tree analogy. If you like this, just imagine what I can do in person at your next event. Go to www.geniwhitehouse.com or www.evenanerd.com for more information and my list of topics, expertise, and nerdy obsessions.
My next deck is going to include basset hounds (see my post from 2023). That is a promise.
This document discusses assets and liabilities in accounting theory. It defines assets as probable future economic benefits obtained or controlled by an entity as a result of past transactions or events. Assets are classified as fixed, current, tangible, and intangible. Liabilities are defined as obligations of an entity to transfer economic benefits in the future. Liabilities are classified as current or long-term. The key difference between assets and liabilities is that assets are resources owned by the entity, while liabilities are amounts owed by the entity.
The document discusses key financial statements and concepts:
- The income statement measures performance over a period by comparing revenues to expenses, yielding net income. It uses accrual accounting to match revenues with the expenses to generate those revenues.
- The balance sheet shows a company's financial position at a point in time by listing its assets, liabilities, and equity. The cash flow statement explains changes in cash from operating, investing, and financing activities.
- Key income statement components include revenues, expenses, and net income. Revenue is recognized following certain criteria and on an accrual basis, as is the recording of expenses according to the matching principle.
This document discusses how to prepare three basic financial statements: the income statement, statement of retained earnings, and balance sheet. It provides examples of the components and format of each statement. The income statement reports revenues, expenses and net income. The statement of retained earnings shows the changes in retained earnings from net income and dividends. The balance sheet lists assets, liabilities, and equity on a specific date. Preparing these statements helps users make better financial decisions.
The income statement shows a company's revenues and expenses over a period of time, with the goal of showing whether the company made a profit or loss. It displays revenues, costs of goods sold that generated the revenues, and all other expenses. The difference between total revenues and total expenses is the net income or loss for the period. Key sections include revenues, costs of goods sold, gross profit, operating expenses, operating income, non-operating items, and net income. The income statement is an important financial statement that helps managers and investors understand a company's financial performance over time.
This document discusses accounting concepts related to merchandising operations and the multiple-step income statement. It defines key terms like cost of goods sold, gross profit, and profit margin ratio. It explains the differences between perpetual and periodic inventory systems, and how to record purchases, sales, returns, and discounts under each. The document also distinguishes between single-step and multiple-step income statements and discusses factors that affect profitability.
1) The document discusses various theories of measurement in accounting, including historic cost, current cost, and exit price approaches.
2) It describes the different scales used in measurement (nominal, ordinal, interval, ratio) and the permissible operations for each.
3) International standards have moved toward a "fair value" approach, but still incorporate elements of historic cost and a mixed measurement system, lacking a consistent theoretical framework. This poses challenges for auditors in determining if financial statements present a true and fair view.
This document discusses the importance of accounting theory and provides an overview of different theories of accounting. It explains that accounting theories aim to explain, predict, or prescribe accounting practices. Early theories were developed through induction based on observations of actual accounting practices. Starting in the 1960s, normative theories attempted to prescribe what accountants should do rather than just describe existing practices. Positive accounting theory seeks to explain and predict which accounting methods managers will choose based on self-interest. No single theory is universally accepted, and theories cannot be proven, but are continually refined through logical deduction and evidence.
This document summarizes accounting concepts and procedures for merchandising businesses. It discusses the periodic and perpetual inventory systems, transactions involved in purchases and sales, and how the cost of goods sold is determined. It also outlines the multiple-step and single-step income statement formats for merchandising companies.
Positive accounting theory aims to explain and predict accounting practices. It views managers as rational actors seeking to maximize their own utility through accounting choices. This can give rise to agency costs as managers' interests may diverge from shareholders. Empirical tests of positive accounting theory examine whether accounting choices reflect opportunistic behavior by managers ex post or efficient contracting ex ante to reduce agency costs. However, evidence for positive accounting theory remains inconclusive.
The document discusses accounting standards for revenue recognition. It defines revenue and the principles of revenue recognition, which are that revenue is recognized when it is earned and realized or realizable. There are four types of revenue transactions and revenue can be recognized at the point of sale or before delivery using different methods like percentage-of-completion for long-term contracts. Revenue recognition may also occur after delivery using installment sales or cost recovery methods depending on whether collection is reasonably assured.
The document is a presentation on an income statement for a company. It includes definitions of key elements of an income statement like revenues, expenses, gains and losses. It describes the two main types of income statements - single-step and multiple-step. It provides an example of a multiple-step income statement for Terry Manning Fashion Center for the year ended December 31, 2010, including calculations of net income and earnings per share.
The document discusses the key aspects of the new revenue recognition standard and its potential impacts on the construction industry. It provides an overview of the standard, including the five-step process for recognizing revenue: 1) identify contracts with customers, 2) identify separate performance obligations, 3) determine transaction price, 4) allocate price to obligations, and 5) recognize revenue when obligations are satisfied. It notes that while the approach will be different, revenue may be similar to percentage-of-completion. It also addresses contract modifications, variable consideration, and time value of money.
SFAC documents are issued by the FASB to provide broad accounting concepts and definitions that serve as a framework for establishing financial accounting standards. SFAC No. 1 discusses the objectives of financial reporting for business enterprises as providing useful information for economic decision making. SFAC No. 2 addresses the qualitative characteristics of accounting information such as relevance, reliability, and neutrality. SFAC No. 5 and 7 provide guidance on recognition criteria, measurement attributes, and using present value and cash flow information in financial statements.
The document discusses key aspects of income statements, including:
1. It outlines 9 learning objectives related to understanding income statements, such as their uses, limitations, format, and how to report various items.
2. Income statements are used to evaluate past performance, assess risk, and predict future performance, but have limitations like omitting some items and involving judgment.
3. The key elements of an income statement are revenues, expenses, gains, and losses, which are discussed in detail.
4. Items within the income statement like gross profit, income from operations, income before tax, and net income are explained.
The document discusses key aspects of income statements, including:
1. It outlines the learning objectives which cover understanding the uses and limitations of income statements, their content and format, how to prepare them, and how to report various items within them.
2. Income statements are used to evaluate past performance, assess risk, and predict future performance, but have limitations as measurements involve judgment and can be affected by accounting methods.
3. The format of an income statement includes revenue, expense, gain, and loss accounts, and IFRS requires minimum line items be presented including operating profit or loss.
4. Items within the income statement like gross profit, income from operations, and gains/losses can be
The document discusses key topics related to income statements and related reporting, including:
1) The uses and limitations of income statements, such as evaluating past performance and assessing risks, as well as limitations from judgment in measurements and earnings management.
2) The required components, format, and sections of an income statement under IFRS, including revenues, expenses, gains/losses, operating income, earnings before tax, and net income.
3) Reporting considerations within the income statement, such as gross profit, income from operations, expense classifications, gains/losses, discontinued operations, and intraperiod tax allocation.
Income Statement and related informationRizkikaAzizah
This document provides an overview of key concepts that will be covered in a chapter on income statements and related information. The learning objectives cover understanding the uses and limitations of income statements, their content and format, how to prepare them, and how to report various items. The chapter will explain the components of an income statement including revenues, expenses, gains and losses. It will also cover reporting earnings per share, discontinued operations, and other comprehensive income. Sample income statements and numerical examples are provided to illustrate the concepts.
Dbs1034 biz trx week 11 income statementStephen Ong
The document discusses how to prepare financial statements such as income statements. It explains that income statements are not part of the double entry system, and how to calculate gross profit and net profit. It provides steps for preparing a trading account and profit and loss account, including closing relevant accounts and transferring balances. The trading and profit and loss accounts are then used to prepare an income statement.
This document discusses key aspects of the income statement, including:
- The income statement measures a company's success over a period of time. It provides information to evaluate past performance and predict future cash flows.
- Limitations include items that cannot be reliably measured and judgment in income measurements. Income can also be affected by accounting methods.
- Earnings management uses accounting techniques to paint an overly positive picture of a company's performance.
- The income statement includes income (revenues and gains) and expenses (expenses and losses). IFRS requires minimum disclosure of these elements.
- Formats include traditional and comprehensive, with the latter including other comprehensive income items affecting equity.
This document discusses financial statements and their importance for businesses. It explains that financial statements include an income statement (trading and profit & loss account) to determine profits/losses over a period, and a balance sheet to ascertain financial position on a given date. The objectives of financial statements are to ascertain business results, financial position, provide information for managers, and help with decision making and assessing solvency. It also distinguishes between capital/revenue expenditures and receipts for preparing the different financial statements.
This document provides an overview and learning objectives for a lecture on statements of financial position (balance sheets) and computerized accounting systems. It begins by defining the balance sheet and explaining its key components and order. It then discusses the benefits and key aspects of computerized accounting systems, including their ability to automate tasks, generate reports quickly and flag inconsistencies. It emphasizes the importance of fully integrating system components and taking care during conversion from manual to computerized systems.
The document provides an overview of income statements, including:
- The uses and limitations of income statements in evaluating past performance and predicting future performance.
- The key components and typical format of an income statement, including revenues, expenses, gains/losses, and net income.
- How to report various income items such as cost of goods sold, unusual gains/losses, discontinued operations, taxes, and earnings per share.
- The reporting of accounting changes and errors, and how to present retrospective and prospective changes.
The document provides an overview of the content and format of the income statement, including:
- The uses and limitations of an income statement in evaluating past performance and predicting future performance.
- The key components of an income statement including revenues, expenses, gains, losses, income from operations, and net income.
- How to report various income items such as unusual gains and losses, discontinued operations, and accounting changes.
- The learning objectives cover the income statement, related equity statements, and reporting accounting changes and errors.
This document discusses the accounting communication process and key players involved, including regulators, managers, directors, auditors, and financial statement users. It covers the roles and guidance these players receive, as well as common financial statements, reports, and disclosures used to communicate accounting information, such as annual reports, quarterly reports, and SEC filings. It also summarizes guidelines for ensuring useful financial reporting and analyzing company performance based on return on equity and its components.
This document outlines the key learning objectives for a chapter on the statement of financial position and statement of cash flows. It provides explanations of the uses and limitations of the statement of financial position, the major classifications of assets, liabilities and equity, and how to prepare these statements. It also defines the purpose of the statement of cash flows, identifies its content areas of operating, investing and financing activities, and how to prepare a basic statement of cash flows. Additional disclosure requirements for notes are also addressed.
This document provides an assignment classification table that categorizes questions and exercises from Chapter 4 by topic and learning objective. It also includes answers to selected questions about income statements. The key points are:
1) The tables categorize questions based on topics like income measurement concepts and earnings per share, as well as learning objectives like understanding the content of an income statement.
2) Income statements are important for predicting future cash flows. They show past performance and the relationship between revenues, expenses, gains and losses.
3) Earnings management can reduce the quality of earnings by distorting information or making earnings less representationally faithful.
The document discusses organizational control and provides an overview of key concepts from chapter 15. It defines organizational control as influencing subunits and members to achieve goals and objectives. It notes that controls can vary in levels, types, and forms, and that organizations use balanced scorecards to manage different control systems. The document also summarizes the costs and benefits of controls, describes two levels of control (strategic and operational), and provides an overview of three basic financial reports used for financial controls: the balance sheet, income/profit and loss statement, and cash flow statement.
This document analyzes the financial statements of two textile companies in India, S.Kumar Nationwide Ltd. and Gokaldas Export Ltd. Ratio analysis is conducted to evaluate the viability, stability, profitability, and liquidity of each company over time. Key ratios like debt-to-equity, return on assets, and profit margins are calculated from income statements and balance sheets. Based on the ratio analysis, the performance of S.Kumar Nationwide Ltd. is found to be better than Gokaldas Export Ltd.
This document provides training materials on financial reporting for agricultural cooperatives. It includes 7 activities covering key topics:
1. The balance sheet, which summarizes a company's assets, liabilities, and equity at a point in time.
2. The income statement, which presents revenues, expenses, and profits over a period of time.
3. The equity statement, which reconciles the beginning and ending owner equity amounts.
4. The cash flow statement, which shows cash inflows and outflows from operating, investing, and financing activities.
5. Management discussion and analysis (MD&A), which internal users use for planning and external users use for performance evaluation.
6.
This chapter discusses key accounting concepts including what accounting is, its users and uses, and generally accepted accounting principles. Accounting identifies, records, and communicates the economic events of an organization. It has both internal and external users, and is used to make decisions about financing, investing, and operating the business. Generally accepted accounting principles (GAAP) are standards that provide consistency in financial reporting. The chapter also covers the basic accounting equation, which shows the relationship between assets, liabilities, and owner's equity, and how business transactions affect this equation.
Lesson 1 overview of principles of accountingFakrul Abdein
This document provides an overview of accounting principles. It defines accounting as identifying, recording, and communicating financial data of an organization. Accounting has internal and external users and is used for decision making. Generally Accepted Accounting Principles (GAAP) provide standards for accounting. The accounting equation, assets = liabilities + owner's equity, and the four main financial statements (balance sheet, income statement, statement of cash flows, owner's equity statement) are also introduced. The financial statements are interrelated and provide information about a company's performance and financial position.
The document discusses key financial statements including the profit and loss statement and balance sheet. It explains that a profit and loss or income statement records a company's earnings and expenses over a period of time, usually a financial year, and measures profitability. The bottom line refers to the profit or loss made, while the top line refers to revenue. Components of the profit and loss statement include sales, cost of goods sold, expenses, depreciation, interest, taxes, and ultimately profit after tax.
This document discusses segmentation and decentralization in organizations. It defines different types of responsibility centers such as cost centers, profit centers, and investment centers. It also discusses the benefits and disadvantages of decentralization. Additionally, it explains how to prepare segmented income statements using a contribution format by separating traceable fixed costs from common fixed costs. The document provides examples of how a company can segment its business by geographic regions or customer channels. It emphasizes that traceable costs of one segment can become common costs of another segment.
- Standards are benchmarks used to measure performance in managerial accounting. Quantity standards specify the input amounts, while price standards specify input costs.
- Direct material price and quantity variances are calculated to analyze differences between actual and standard costs. The price variance is the difference due to actual price paid, while the quantity variance is due to using more or less material than standard.
- An example calculates variances for a company that used 210kg of fiberfill costing $1,029 total to make 2,000 parkas. The $21 favorable price variance and $50 unfavorable quantity variance are determined.
This document provides an overview of budgeting and the budgeting process. It discusses why organizations create budgets, the basic framework of budgets including planning and control, and the advantages of budgeting such as defining goals and coordinating activities. The document also covers various types of budgets including operating budgets and continuous budgets. It discusses budgeting approaches like top-down versus bottom-up budgeting and incremental versus zero-based budgeting. Finally, it provides learning objectives about understanding basic budgeting terms and components of master budgets for different industries.
The document discusses flexible budgets and performance analysis. It provides examples to illustrate how to prepare flexible budgets that account for multiple activity levels, as well as calculate variances between flexible budgets and actual results. The key benefits of flexible budgets are that they allow for "apples-to-apples" comparisons of costs when actual activity differs from planned levels. Flexible budgets more accurately reveal whether variances are due to external factors like activity changes or controllable factors like poor cost management. The document outlines how to prepare flexible budgets, calculate variances, and analyze performance using these variance reports.
This document discusses segmentation and decentralization in organizations. It defines different types of responsibility centers such as cost centers, profit centers, and investment centers. It also discusses the benefits and disadvantages of decentralization. Additionally, it explains how to prepare segmented income statements using a contribution format by separating traceable fixed costs from common fixed costs. The document provides examples of how a company can segment its business by geographic regions or customer channels. It emphasizes that traceable costs of one segment can become common costs of another segment.
- Standards are benchmarks used to measure performance in managerial accounting. Quantity standards specify the input amounts, while price standards specify input costs.
- Direct material price and quantity variances are calculated to analyze differences between actual and standard costs. The price variance is the difference due to actual price paid, while the quantity variance is due to using more or less material than standard.
- An example calculates variances for a company that used 210kg of fiberfill costing $1,029 total to make 2,000 parkas. The $21 favorable price variance and $50 unfavorable quantity variance are determined.
This document outlines how to prepare flexible budgets that can be used to evaluate performance. It discusses the deficiencies of static budgets and how flexible budgets address them by adjusting for different activity levels. It provides an example of Larry's Lawn Service to demonstrate how to prepare a flexible budget with multiple cost drivers. Key steps include preparing flexible budgets, calculating activity variances between the static and flexible budgets, calculating revenue and spending variances between the flexible budget and actual results, and combining these variances into a single performance report. The document suggests flexible budgets can also be used for non-profits and cost centers.
This document provides an overview of budgeting concepts and processes. It discusses why organizations create budgets, the basic framework of budgets including planning and control, and the advantages of budgeting such as defining goals and allocating resources. It also covers budgeting terms and methods, including bottom-up versus top-down budgeting, incremental versus zero-based budgets, and the roles of management and budget committees. Finally, it discusses the key components of master budgets for different types of industries, including budgets for production, sales, materials, labor, and cash for manufacturing companies.
This document discusses cost behavior analysis. It explains that costs can be variable, fixed, or mixed. Variable costs change proportionally with activity level, while fixed costs remain constant. Mixed costs have both fixed and variable components. The document provides examples like cell phone bills and utility costs to illustrate different types of costs. It also discusses using scattergraph plots to diagnose whether a cost is variable or fixed based on its behavior over different activity levels. The overall purpose is to understand how to classify and analyze costs to predict how they will change with activity.
The document discusses managerial accounting concepts including the work of management (planning, controlling, directing and motivating), manufacturing costs (direct materials, direct labor, manufacturing overhead), and cost flows. It provides learning objectives on the differences between financial and managerial accounting, manufacturing cost categories, distinguishing product and period costs, and preparing income statements and schedules of manufacturing costs. Key points include defining direct materials, direct labor, manufacturing overhead, and period costs. Formulas are given for calculating cost of goods sold and manufacturing costs.
This document contains slides from a McGraw-Hill textbook on managerial and cost accounting. It covers several topics:
- The definitions and roles of management accounting and cost accounting in helping companies make better decisions.
- Global trade trends from 1950-2009 showing increasing trade in manufactures and declines in fuels and agriculture.
- Regional shares of world exports in 2009 led by North America, Europe and Asia.
- The distribution of Fortune Global 500 companies by region from 2005-2010, with increases from China, India and Asia Pacific.
The document discusses issues related to share capital, including repurchases or buybacks of equity shares by a company. It explains two methods for accounting for share buybacks - the share retirement method and treasury share method. It also covers share dividends, share splits, share rights, and the statement of changes in equity. Several illustrations are provided to demonstrate journal entries for share buybacks and subsequent distributions of treasury shares under each method.
The document discusses various aspects of owners' equity, including:
- Owners' equity represents the investment made by owners in a business.
- Statements of owners' equity track the capital contributed and any profits/losses of a business over time.
- Different types of business organizations (sole proprietorships, partnerships, companies) have different structures for owners' equity and liability.
- Companies establish authorized, issued, and paid-up share capital through the issuance of ordinary and preference shares. Reserves are also part of owners' equity.
This document discusses current liabilities, provisions, and contingencies. It begins by outlining the learning objectives, which are to describe various types of current liabilities, explain classification issues related to short-term debt expected to be refinanced, identify types of employee-related liabilities, explain accounting for provisions, and identify criteria for contingent liabilities and assets. It then defines key terms like liability, current liability, and contingencies. Specific types of current liabilities are explained, such as accounts payable, notes payable, current maturities of long-term debt, and unearned revenue. The accounting treatment and examples of these items are provided.
This document discusses the characteristics and accounting treatment of short term investments. Short term investments must be capable of prompt liquidation and there must be management intent to convert them to cash within one year. They include equity and debt securities carried at cost or at the lower of cost or market value. Gains or losses from sales and reclassifications are recognized in income. Disclosure in financial statements includes policies, income amounts, and market values of investments carried at cost.
The document discusses inventory valuation methods, including:
1) Perpetual and periodic inventory systems, with the perpetual system providing continuous inventory records and the periodic system using physical counts.
2) Cost flow assumptions like FIFO, average cost, and specific identification, which can impact ending inventory balances and cost of goods sold.
3) Effects of inventory errors, which may misstate the financial statements in a given year but offset in later years.
4) Items included in inventory costs, such as product costs directly connected to goods, and treatment of purchase discounts.
The document discusses accounts receivable and notes receivable. It defines receivables as amounts due from individuals and companies. It identifies the main types of receivables as accounts receivable, notes receivable, and other receivables. It then covers accounting issues related to recognition, valuation, and estimation of uncollectibles for accounts receivable. Finally, it discusses the processes of assigning or factoring accounts receivable, including examples of journal entries for assigning receivables as collateral for a loan.
The document discusses population distributions, sampling distributions, and key concepts related to sampling. Some main points:
- A population distribution shows the probability of each possible value in the entire population. A sampling distribution shows the probability of getting each sample statistic value, such as the mean, from random samples of a given size.
- The mean of the sampling distribution of the sample mean is always equal to the population mean. The standard deviation of the sampling distribution decreases as sample size increases.
- For large samples from a normally distributed population, the sampling distribution of the mean will be normally distributed. For large samples from non-normal populations, the central limit theorem implies the sampling distribution will be approximately normal.
-
This document discusses discrete probability distributions, specifically the binomial and Poisson distributions. It provides information on calculating probabilities using the binomial and Poisson probability formulas and tables. It defines key characteristics of binomial experiments and conditions for applying the binomial and Poisson distributions. Examples are given to demonstrate calculating probabilities for each distribution, including finding the mean, variance and standard deviation for binomial distributions.
The document provides information about discrete and continuous random variables:
- It defines discrete and continuous random variables and gives examples of each. A discrete random variable can take countable values while a continuous random variable can take any value in an interval.
- It discusses probability distributions for discrete random variables, including defining the probability distribution and giving examples of how to construct probability distributions from data in tables. It also covers concepts like mean, standard deviation, and cumulative distribution functions.
- Various examples are provided to illustrate how to calculate probabilities, means, standard deviations, and construct probability distributions and cumulative distribution functions from data about discrete random variables. Continuous random variables are also briefly introduced.
2. Slide
4-2
C H A P T E RC H A P T E R 44
INCOME STATEMENT AND RELATEDINCOME STATEMENT AND RELATED
INFORMATIONINFORMATION
Intermediate Accounting
IFRS Edition
Kieso, Weygandt, and Warfield
3. Slide
4-3
1.1. Understand the uses and limitations of an income statement.Understand the uses and limitations of an income statement.
2.2. Understand the content and format of the income statement.Understand the content and format of the income statement.
3.3. Prepare an income statement.Prepare an income statement.
4.4. Explain how to report items in the income statement.Explain how to report items in the income statement.
5.5. Identify where to report earnings per share information.Identify where to report earnings per share information.
6.6. Understand the reporting of accounting changes and errors.Understand the reporting of accounting changes and errors.
7.7. Prepare a retained earnings statement.Prepare a retained earnings statement.
8.8. Explain how to report other comprehensive income.Explain how to report other comprehensive income.
Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives
4. Slide
4-4
ElementsElements
MinimumMinimum
disclosuredisclosure
IntermediateIntermediate
componentscomponents
IllustrationIllustration
CondensedCondensed
income statementsincome statements
Income StatementIncome Statement
Format of IncomeFormat of Income
StatementStatement
Reporting WithinReporting Within
the Incomethe Income
StatementStatement
Other ReportingOther Reporting
IssuesIssues
UsefulnessUsefulness
LimitationsLimitations
Quality ofQuality of
EarningsEarnings
Gross profitGross profit
Income fromIncome from
operationsoperations
Income beforeIncome before
income taxincome tax
Net incomeNet income
Non-controllingNon-controlling
interestsinterests
Earnings per shareEarnings per share
DiscontinuedDiscontinued
operationsoperations
Intraperiod taxIntraperiod tax
allocationallocation
SummarySummary
AccountingAccounting
changes and errorschanges and errors
Retained earningsRetained earnings
statementstatement
ComprehensiveComprehensive
incomeincome
Changes in equityChanges in equity
statementstatement
Income Statement and Related InformationIncome Statement and Related InformationIncome Statement and Related InformationIncome Statement and Related Information
5. Slide
4-5
Evaluate past performance.Evaluate past performance.
Income StatementIncome StatementIncome StatementIncome Statement
LO 1 Understand the uses and limitations of an income statement.LO 1 Understand the uses and limitations of an income statement.
Help assess the risk or uncertainty ofHelp assess the risk or uncertainty of
achieving future cash flows.achieving future cash flows.
Predicting future performance.Predicting future performance.
UsefulnessUsefulness
6. Slide
4-6
Companies omit items that cannotCompanies omit items that cannot
be measured reliably.be measured reliably.
Income StatementIncome StatementIncome StatementIncome Statement
LimitationsLimitations
LO 1 Understand the uses and limitations of an income statement.LO 1 Understand the uses and limitations of an income statement.
Income measurement involvesIncome measurement involves
judgment.judgment.
Income is affected by the accountingIncome is affected by the accounting
methods employed.methods employed.
7. Slide
4-7
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
LO 1 Understand the uses and limitations of an income statement.LO 1 Understand the uses and limitations of an income statement.
IncomeIncome – Increases in economic benefits during the accounting– Increases in economic benefits during the accounting
period in the form of inflows or enhancements of assets orperiod in the form of inflows or enhancements of assets or
decreases of liabilities that result in increases in equity, otherdecreases of liabilities that result in increases in equity, other
than those relating to contributions from shareholders.than those relating to contributions from shareholders.
Elements of the Income StatementElements of the Income Statement
8. Slide
4-8
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
LO 2 Understand the content and format of the income statement.
Revenue AccountsRevenue Accounts
Elements of the Income StatementElements of the Income Statement
SalesSales
Fee revenueFee revenue
Interest revenueInterest revenue
Dividend revenueDividend revenue
Rent revenueRent revenue
IncomeIncome includes both revenues and gains.includes both revenues and gains.
RevenuesRevenues - ordinary activities of a company- ordinary activities of a company
GainsGains - may or may not arise from ordinary activities.- may or may not arise from ordinary activities.
Gain AccountsGain Accounts
Gains on the sale of long-termGains on the sale of long-term
assetsassets
Unrealized gains on available-Unrealized gains on available-
for-sale securities.for-sale securities.
9. Slide
4-9
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
LO 1 Understand the uses and limitations of an income statement.
ExpensesExpenses – Decreases in economic benefits during the– Decreases in economic benefits during the
accounting period in the form of outflows or depletions of assetsaccounting period in the form of outflows or depletions of assets
or incurrences of liabilities that result in decreases in equity,or incurrences of liabilities that result in decreases in equity,
other than those relating to distributions to shareholders.other than those relating to distributions to shareholders.
Cost of goods soldCost of goods sold
Depreciation expenseDepreciation expense
Interest expenseInterest expense
Examples of Expense AccountsExamples of Expense Accounts
Elements of the Income Statement
Rent expenseRent expense
Salary expenseSalary expense
10. Slide
4-10
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
LO 2 Understand the content and format of the income statement.LO 2 Understand the content and format of the income statement.
Expense AccountsExpense Accounts
Elements of the Income StatementElements of the Income Statement
Cost of goods soldCost of goods sold
Depreciation expenseDepreciation expense
Interest expenseInterest expense
Rent expenseRent expense
Salary expenseSalary expense
ExpensesExpenses includes both expenses and losses.includes both expenses and losses.
ExpensesExpenses - ordinary activities of a company- ordinary activities of a company
LossesLosses - may or may not arise from ordinary activities.- may or may not arise from ordinary activities.
Loss AccountsLoss Accounts
Losses on restructuring chargesLosses on restructuring charges
Losses on to sale of long-termLosses on to sale of long-term
assetsassets
Unrealized losses on available-Unrealized losses on available-
for-sale securities.for-sale securities.
11. Slide
4-11
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
Elements of the Income StatementElements of the Income Statement
IFRS requires,IFRS requires, at a minimumat a minimum, the following be presented on, the following be presented on
the income statement.the income statement.
LO 2 Understand the content and format of the income statement.LO 2 Understand the content and format of the income statement.
12. Slide
4-12
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
IntermediateIntermediate
ComponentsComponents
Common forCommon for
companies tocompanies to
present some or allpresent some or all
of these sectionsof these sections
and totals within theand totals within the
income statement.income statement.
Illustration 4-1
Income Statement Format
LO 2LO 2
14. Slide
4-14
Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income Statement
LO 3 Prepare an income statement.LO 3 Prepare an income statement.
CondensedCondensed
MoreMore
representativerepresentative
of the typeof the type
found infound in
practice.practice.
Illustration 4-3
Condensed Income Statement
15. Slide
4-15
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Gross ProfitGross Profit
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Computed by deducting cost of goods sold from net salesComputed by deducting cost of goods sold from net sales
revenue.revenue.
Disclosure of net sales revenue is useful.Disclosure of net sales revenue is useful.
Unusual or incidental revenue is disclosed in other incomeUnusual or incidental revenue is disclosed in other income
and expense.and expense.
Analysts can more easily understand and assess trends inAnalysts can more easily understand and assess trends in
revenue from continuing operations.revenue from continuing operations.
16. Slide
4-16
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Income from OperationsIncome from Operations
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Determined by deducting selling and administrativeDetermined by deducting selling and administrative
expenses as well as other income and expense from grossexpenses as well as other income and expense from gross
profit.profit.
Highlights items that affect regular business activities.Highlights items that affect regular business activities.
Used to predict the amount, timing, and uncertainty ofUsed to predict the amount, timing, and uncertainty of
future cash flows.future cash flows.
17. Slide
4-17
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Income from OperationsIncome from Operations
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Reported byReported by
Nature, orNature, or
FunctionFunction
Expense ClassificationExpense Classification
18. Slide
4-18
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Illustration:Illustration: Assume that the accounting firm of Telaris Co.Assume that the accounting firm of Telaris Co.
provides audit, tax, and consulting services. It has theprovides audit, tax, and consulting services. It has the
following revenues and expenses.following revenues and expenses.
Expense ClassificationExpense Classification
19. Slide
4-19
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Expense Classification (Expense Classification (NatureNature-of-Expense-of-Expense Approach)Approach)
Illustration 4-5Illustration 4-5
20. Slide
4-20
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Expense Classification (Expense Classification (FunctionFunction-of-Expense-of-Expense Approach)Approach)
Illustration 4-6Illustration 4-6
The function-of-expense method is generally used in practice although manyThe function-of-expense method is generally used in practice although many
companies believe both approaches have merit.companies believe both approaches have merit.
21. Slide
4-21
Illustration 4-7Illustration 4-7
Number of Unusual ItemsNumber of Unusual Items
Reported in a Recent YearReported in a Recent Year
by 600 Large Companiesby 600 Large Companies
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Gains and LossesGains and Losses
22. Slide
4-22
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Gains and LossesGains and Losses
IASBIASB takes the position that bothtakes the position that both
revenues and expenses andrevenues and expenses and
other income and expenseother income and expense
should be reported as part of income from operations.should be reported as part of income from operations.
Companies can provide additional line items, headings, and subtotals whenCompanies can provide additional line items, headings, and subtotals when
such presentation is relevant to an understanding of the entity’s financialsuch presentation is relevant to an understanding of the entity’s financial
performance.performance.
23. Slide
4-23
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Gains and LossesGains and Losses
Additional items that may need disclosure:Additional items that may need disclosure:
Losses on write-downs of inventories to net realizable value or ofLosses on write-downs of inventories to net realizable value or of
property, plant, and equipment to recoverable amount, as well asproperty, plant, and equipment to recoverable amount, as well as
reversals of such write-downs.reversals of such write-downs.
Losses on restructurings of the activities and reversals of anyLosses on restructurings of the activities and reversals of any
provisions for the costs of restructuring.provisions for the costs of restructuring.
Gains or losses on the disposal of items of property, plant, and,Gains or losses on the disposal of items of property, plant, and,
equipment or investments.equipment or investments.
Litigation settlements.Litigation settlements.
Other reversals of liabilities.Other reversals of liabilities.
24. Slide
4-24
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Income before Income TaxIncome before Income Tax
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Financing costs must be reported on the income statement.Financing costs must be reported on the income statement.
Illustration 4-8
25. Slide
4-25
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Net IncomeNet Income
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
Represents the income afterRepresents the income after allall
revenues andrevenues and
expensesexpenses
for the period are considered.for the period are considered.
Viewed by many as the most important measure of aViewed by many as the most important measure of a
company’s success or failure for a given period of time.company’s success or failure for a given period of time.
26. Slide
4-26
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Allocation to Non-Controlling InterestAllocation to Non-Controlling Interest
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
If a company prepares a consolidated income statement thatIf a company prepares a consolidated income statement that
includes a partially own subsidiary. IFRS requires that net incomeincludes a partially own subsidiary. IFRS requires that net income
of the subsidiary be allocated to the controlling and non-of the subsidiary be allocated to the controlling and non-
controlling interest. This allocation is reported at the bottom of thecontrolling interest. This allocation is reported at the bottom of the
income statement after net income.income statement after net income.
Illustration 4-9
(amounts given)
27. Slide
4-27
€€800,000800,000
100,000100,000
120,000120,000
90,00090,000
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
BE4-3:BE4-3: Presented below is some financial information related toPresented below is some financial information related to
Volaire Group. Compute the following:Volaire Group. Compute the following:
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
RevenuesRevenues €€800,000800,000
Income from continuing operationsIncome from continuing operations 100,000100,000
Comprehensive incomeComprehensive income 120,000120,000
Net incomeNet income 90,00090,000
Income from operationsIncome from operations 220,000220,000
Selling and administrative expensesSelling and administrative expenses 500,000500,000
Income before income taxIncome before income tax 200,000200,000
Other IncomeOther Income
and Expenseand Expense
€€80,00080,000
Solution on
notes page
28. Slide
4-28
€€800,000800,000
100,000100,000
120,000120,000
90,00090,000
€€20,00020,000
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
RevenuesRevenues €€800,000800,000
Income from continuing operationsIncome from continuing operations 100,000100,000
Comprehensive incomeComprehensive income 120,000120,000
Net incomeNet income 90,00090,000
Income from operationsIncome from operations 220,000220,000
Selling and administrative expensesSelling and administrative expenses 500,000500,000
Income before income taxIncome before income tax 200,000200,000
FinancingFinancing
CostsCosts
Solution on
notes page
BE4-3:BE4-3: Presented below is some financial information related toPresented below is some financial information related to
Volaire Group. Compute the following:Volaire Group. Compute the following:
29. Slide
4-29
€€100,000100,000
€€800,000800,000
- 100,000- 100,000
120,000120,000
90,00090,000
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
RevenuesRevenues €€800,000800,000
Income from continuing operationsIncome from continuing operations 100,000100,000
Comprehensive incomeComprehensive income 120,000120,000
Net incomeNet income 90,00090,000
Income from operationsIncome from operations 220,000220,000
Selling and administrative expensesSelling and administrative expenses 500,000500,000
Income before income taxIncome before income tax 200,000200,000
Income TaxIncome Tax
Solution on
notes page
BE4-3:BE4-3: Presented below is some financial information related toPresented below is some financial information related to
Volaire Group. Compute the following:Volaire Group. Compute the following:
30. Slide
4-30
-- €€10,00010,000
€€800,000800,000
100,000100,000
120,000120,000
- 90,000- 90,000
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
RevenuesRevenues €€800,000800,000
Income from continuing operationsIncome from continuing operations 100,000100,000
Comprehensive incomeComprehensive income 120,000120,000
Net incomeNet income 90,00090,000
Income from operationsIncome from operations 220,000220,000
Selling and administrative expensesSelling and administrative expenses 500,000500,000
Income before income taxIncome before income tax 200,000200,000
DiscontinuedDiscontinued
OperationsOperations
Solution on
notes page
BE4-3:BE4-3: Presented below is some financial information related toPresented below is some financial information related to
Volaire Group. Compute the following:Volaire Group. Compute the following:
31. Slide
4-31
€€30,00030,000
€€800,000800,000
100,000100,000
120,000120,000
- 90,000- 90,000
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 4 Explain how to report items in the income statement.LO 4 Explain how to report items in the income statement.
RevenuesRevenues €€800,000800,000
Income from continuing operationsIncome from continuing operations 100,000100,000
Comprehensive incomeComprehensive income 120,000120,000
Net incomeNet income 90,00090,000
Income from operationsIncome from operations 220,000220,000
Selling and administrative expensesSelling and administrative expenses 500,000500,000
Income before income taxIncome before income tax 200,000200,000
OtherOther
ComprehensiveComprehensive
IncomeIncome
Solution on
notes page
BE4-3:BE4-3: Presented below is some financial information related toPresented below is some financial information related to
Volaire Group. Compute the following:Volaire Group. Compute the following:
32. Slide
4-32
Important business indicator.Important business indicator.
Measures the dollars earned by each ordinary share.Measures the dollars earned by each ordinary share.
Must be disclosed on the income statement.Must be disclosed on the income statement.
LO 5 Identify where to report earnings per share information.LO 5 Identify where to report earnings per share information.
Net income - Preference dividendsNet income - Preference dividends
Weighted average of ordinary shares outstandingWeighted average of ordinary shares outstanding
Earnings Per ShareEarnings Per Share
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
33. Slide
4-33
Earnings Per Share (BE4-10):Earnings Per Share (BE4-10): In 2010, Hollis CorporationIn 2010, Hollis Corporation
reported net income of $1,000,000. It declared and paidreported net income of $1,000,000. It declared and paid
preference share dividends of $250,000. During 2010, Hollis hadpreference share dividends of $250,000. During 2010, Hollis had
a weighted average of 190,000 ordinary shares outstanding.a weighted average of 190,000 ordinary shares outstanding.
Compute Hollis’s 2010 earnings per share.Compute Hollis’s 2010 earnings per share.
- $250,000- $250,000$1,000,000$1,000,000
190,000190,000
= $3.95$3.95 per shareper share
LO 5 Identify where to report earnings per share information.LO 5 Identify where to report earnings per share information.
Net income - Preference dividendsNet income - Preference dividends
Weighted average number of ordinary sharesWeighted average number of ordinary shares
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
34. Slide
4-34 LO 5 Identify where to report earnings per share information.LO 5 Identify where to report earnings per share information.
Discontinued OperationsDiscontinued Operations
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
A component of an entity that either has been disposed of, or isA component of an entity that either has been disposed of, or is
classified as held-for-sale, and:classified as held-for-sale, and:
1.1. Represents a major line of business or geographical area ofRepresents a major line of business or geographical area of
operations, oroperations, or
2.2. Is part of a single, co-coordinated plan to dispose of a majorIs part of a single, co-coordinated plan to dispose of a major
line of business or geographical area of operations, orline of business or geographical area of operations, or
3.3. Is a subsidiary acquired exclusively with a view to resell.Is a subsidiary acquired exclusively with a view to resell.
35. Slide
4-35 LO 5 Identify where to report earnings per share information.LO 5 Identify where to report earnings per share information.
Discontinued OperationsDiscontinued Operations
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
Companies report as discontinued operationsCompanies report as discontinued operations
1.1. (in a separate income statement category) the gain or loss(in a separate income statement category) the gain or loss
from disposal of a component of a business.from disposal of a component of a business.
2.2. The results of operations of a component that has been orThe results of operations of a component that has been or
will be disposed of separately from continuing operations.will be disposed of separately from continuing operations.
3.3. The effects of discontinued operations net of tax, as aThe effects of discontinued operations net of tax, as a
separate category after continuing operations.separate category after continuing operations.
36. Slide
4-36
Total loss on discontinued operations 800,000
Illustration: Multiplex Products, a highly diversified company,
decides to discontinue its electronics division. During the current
year, the electronics division lost $300,000 (net of tax). Multiplex
sold the division at the end of the year at a loss of $500,000 (net
of tax).
Income from continuing operations $20,000,000
Discontinued operations:
Loss from operations, net of tax 300,000
Loss on disposal, net of tax 500,000
Net income $19,200,000
LO 5 Identify where to report earnings per share information.
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
37. Slide
4-37
A company thatA company that
reports areports a
discontinueddiscontinued
operation mustoperation must
report per sharereport per share
amounts for theamounts for the
line item either online item either on
the face of thethe face of the
income statementincome statement
or in the notes toor in the notes to
the financialthe financial
statements.statements.
LO 5 Identify where to report earnings per share information.LO 5 Identify where to report earnings per share information.
Illustration 4-12Illustration 4-12
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
38. Slide
4-38
SummarySummary
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 6 Explain intraperiod tax allocation.LO 6 Explain intraperiod tax allocation.
39. Slide
4-39
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 6 Explain intraperiod tax allocation.LO 6 Explain intraperiod tax allocation.
SummarySummary
40. Slide
4-40
Different Income ConceptsDifferent Income Concepts
Reporting Within the Income StatementReporting Within the Income StatementReporting Within the Income StatementReporting Within the Income Statement
LO 6 Explain intraperiod tax allocation.LO 6 Explain intraperiod tax allocation.
Users andUsers and
preparers look atpreparers look at
more than justmore than just
the bottom linethe bottom line
income number,income number,
which supportswhich supports
the IFRSthe IFRS
requirement torequirement to
provide subtotalsprovide subtotals
within the incomewithin the income
statement.statement.
41. Slide
4-41
Company adopts a different accounting principle.Company adopts a different accounting principle.
Retrospective adjustment.Retrospective adjustment.
Cumulative effect adjustment to beginning retained earnings.Cumulative effect adjustment to beginning retained earnings.
Approach preserves comparability.Approach preserves comparability.
Examples include:Examples include:
Change from FIFO to average cost.Change from FIFO to average cost.
Change from the percentage-of-completion to theChange from the percentage-of-completion to the
completed-contract method.completed-contract method.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
Accounting Changes and ErrorsAccounting Changes and Errors
Changes in Accounting PrincipleChanges in Accounting Principle
42. Slide
4-42
Change in Accounting Principle:Change in Accounting Principle: Gaubert Inc. decided inGaubert Inc. decided in
March 2011 to change from FIFO to weighted-average inventoryMarch 2011 to change from FIFO to weighted-average inventory
pricing. Gaubert’s income before taxes, using the new weighted-pricing. Gaubert’s income before taxes, using the new weighted-
average method in 2011, is $30,000.average method in 2011, is $30,000.
Illustration 4-17Illustration 4-17
Calculation of a Change inCalculation of a Change in
Accounting PrincipleAccounting Principle
Illustration 4-18Illustration 4-18
Income StatementIncome Statement
Presentation of a ChangePresentation of a Change
in Accounting Principlein Accounting Principle
(Based on 30% tax rate)(Based on 30% tax rate)
Pretax Income Data
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
Solution on
notes page
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
43. Slide
4-43
Accounted for in the period of change and future periods.Accounted for in the period of change and future periods.
Not handled retrospectively.Not handled retrospectively.
Not considered errors.Not considered errors.
Examples include:Examples include:
Useful lives and residual values of depreciable assets.Useful lives and residual values of depreciable assets.
Allowance for uncollectible receivables.Allowance for uncollectible receivables.
Inventory obsolescence.Inventory obsolescence.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
Changes in EstimateChanges in Estimate
44. Slide
4-44
Change in Estimate:Change in Estimate: Arcadia HS, purchased equipment forArcadia HS, purchased equipment for
$510,000 which was estimated to have a useful life of 10 years$510,000 which was estimated to have a useful life of 10 years
with a salvage value of $10,000 at the end of that time.with a salvage value of $10,000 at the end of that time.
Depreciation has been recorded for 7 years on a straight-lineDepreciation has been recorded for 7 years on a straight-line
basis. In 2011 (year 8), it is determined that the total estimatedbasis. In 2011 (year 8), it is determined that the total estimated
life should be 15 years with a salvage value of $5,000 at the endlife should be 15 years with a salvage value of $5,000 at the end
of that time.of that time.
Questions:Questions:
What is the journal entry to correctWhat is the journal entry to correct
the prior years’ depreciation?the prior years’ depreciation?
Calculate the depreciation expenseCalculate the depreciation expense
for 2011.for 2011.
No EntryNo Entry
RequiredRequired
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
45. Slide
4-45
EquipmentEquipment $510,000$510,000
Fixed Assets:Fixed Assets:
Accumulated depreciationAccumulated depreciation 350,000350,000
Net book value (NBV)Net book value (NBV) $160,000$160,000
Balance SheetBalance Sheet (Dec. 31, 2010)(Dec. 31, 2010)
After 7 yearsAfter 7 years
Equipment cost $510,000
Residual value - 10,000
Depreciable base 500,000
Useful life (original) 10 years
Annual depreciation $ 50,000 x 7 years =x 7 years = $350,000$350,000
First, establish NBVFirst, establish NBV
at date of change inat date of change in
estimate.estimate.
First, establish NBVFirst, establish NBV
at date of change inat date of change in
estimate.estimate.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
46. Slide
4-46
After 7 yearsAfter 7 years
Net book value $160,000
Residual value (new) - 5,000
Depreciable base 155,000
Useful life remaining 8 years
Annual depreciation $ 19,375
DepreciationDepreciation
Expense calculationExpense calculation
for 2011.for 2011.
DepreciationDepreciation
Expense calculationExpense calculation
for 2011.for 2011.
Depreciation expense 19,375
Accumulated depreciation 19,375
Journal entry for 2011
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
47. Slide
4-47
Result from:Result from:
mathematical mistakes.mathematical mistakes.
mistakes in application of accounting principles.mistakes in application of accounting principles.
oversight or misuse of facts.oversight or misuse of facts.
Corrections treated asCorrections treated as prior period adjustments.prior period adjustments.
Adjustment to the beginning balance of retainedAdjustment to the beginning balance of retained
earnings.earnings.
Corrections of ErrorsCorrections of Errors
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
48. Slide
4-48
Corrections of Errors:Corrections of Errors: To illustrate, in 2012, Hillsboro Co.To illustrate, in 2012, Hillsboro Co.
determined that it incorrectly overstated its accountsdetermined that it incorrectly overstated its accounts
receivable and sales revenue by $100,000 in 2011. In 2012,receivable and sales revenue by $100,000 in 2011. In 2012,
Hillsboro makes the following entry to correct for this errorHillsboro makes the following entry to correct for this error
(ignore income taxes).(ignore income taxes).
Retained earningsRetained earnings 100,000100,000
Accounts receivableAccounts receivable 100,000100,000
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
49. Slide
4-49
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 7 Understand the reporting of accounting changes and errors.LO 7 Understand the reporting of accounting changes and errors.
50. Slide
4-50 LO 8 Prepare a retained earnings statement.LO 8 Prepare a retained earnings statement.
IncreaseIncrease
Net incomeNet income
Change inChange in
accounting principleaccounting principle
Prior periodPrior period
adjustmentadjustment
DecreaseDecrease
Net lossNet loss
DividendsDividends
Change inChange in
accounting principleaccounting principle
Prior periodPrior period
adjustmentadjustment
Retained Earnings StatementRetained Earnings Statement
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
51. Slide
4-51 LO 8 Prepare a retained earnings statement.LO 8 Prepare a retained earnings statement.
Retained Earnings StatementRetained Earnings Statement
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Illustration 4-20Illustration 4-20
52. Slide
4-52
DisclosedDisclosed
In notes to the financial statements.In notes to the financial statements.
As Appropriated Retained Earnings.As Appropriated Retained Earnings.
LO 8 Prepare a retained earnings statement.LO 8 Prepare a retained earnings statement.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Restrictions of Retained EarningsRestrictions of Retained Earnings
53. Slide
4-53
All changes in equity during a period except thoseAll changes in equity during a period except those
resulting from investments by owners and distributionsresulting from investments by owners and distributions
to owners.to owners.
IncludesIncludes::
all revenues and gains, expenses and lossesall revenues and gains, expenses and losses
reported in net income, andreported in net income, and
all gains and losses that bypass net income but affectall gains and losses that bypass net income but affect
equity.equity.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Comprehensive IncomeComprehensive Income
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
54. Slide
4-54
Other ComprehensiveOther Comprehensive
IncomeIncome
Unrealized gains andUnrealized gains and
losses on available-for-losses on available-for-
sale securities.sale securities.
Translation gains andTranslation gains and
losses on foreignlosses on foreign
currency.currency.
Plus othersPlus others
+
Reported in EquityReported in Equity
Comprehensive IncomeComprehensive Income
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Income Statement
55. Slide
4-55
Review QuestionReview Question
Gains and losses that bypass net income but affect equityGains and losses that bypass net income but affect equity
are referred to asare referred to as
a.a. comprehensive income.comprehensive income.
b.b. other comprehensive incomeother comprehensive income..
c.c. prior period incomeprior period income..
d.d. unusual gains and lossesunusual gains and losses..
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Gains and losses that bypass net income but affect equityGains and losses that bypass net income but affect equity
are referred to asare referred to as
a.a. comprehensive income.comprehensive income.
b.b. other comprehensive incomeother comprehensive income..
c.c. prior period incomeprior period income..
d.d. unusual gains and lossesunusual gains and losses..
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
56. Slide
4-56
Two approaches to reporting ComprehensiveTwo approaches to reporting Comprehensive
Income:Income:
1.1. A second income statement.A second income statement.
2.2. A combined statement of comprehensiveA combined statement of comprehensive
income.income.
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
57. Slide
4-57
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Illustration 4-21Illustration 4-21
ComprehensiveComprehensive
IncomeIncome
Two-statementTwo-statement
format:format:
ComprehensiveComprehensive
IncomeIncome
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
58. Slide
4-58
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Illustration 4-22Illustration 4-22
ComprehensiveComprehensive
IncomeIncome
CombinedCombined
statementstatement
format:format:
ComprehensiveComprehensive
IncomeIncome
59. Slide
4-59
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Statement of Changes in EquityStatement of Changes in Equity
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Required,Required, in additionin addition to a statement of comprehensiveto a statement of comprehensive
income.income.
Generally comprised ofGenerally comprised of
share capital—ordinary,share capital—ordinary,
share premium—ordinary,share premium—ordinary,
retained earnings, and theretained earnings, and the
accumulated balances in other comprehensiveaccumulated balances in other comprehensive
items.items.
60. Slide
4-60
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Statement of Changes in EquityStatement of Changes in Equity
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Reports the change in each equity account and in totalReports the change in each equity account and in total
equity for the period.equity for the period.
1.1. Comprehensive income for the period.Comprehensive income for the period.
2.2. Contributions (issuances of shares) and distributionsContributions (issuances of shares) and distributions
(dividends) to owners.(dividends) to owners.
3.3. Reconciliation of the carrying amount of each componentReconciliation of the carrying amount of each component
of equity from the beginning to the end of the period.of equity from the beginning to the end of the period.
61. Slide
4-61
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Illustration 4-23Illustration 4-23
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Statement of Changes in EquityStatement of Changes in Equity
62. Slide
4-62
Other Reporting IssuesOther Reporting IssuesOther Reporting IssuesOther Reporting Issues
Illustration 4-24Illustration 4-24
LO 9 Explain how to report other comprehensive income.LO 9 Explain how to report other comprehensive income.
Statement of Changes in EquityStatement of Changes in Equity
Regardless of the display format used, V. Gill reports theRegardless of the display format used, V. Gill reports the accumulatedaccumulated
other comprehensive incomeother comprehensive income of $90,000 in the equity section of theof $90,000 in the equity section of the
statement of financial position as follows.statement of financial position as follows.
63. Slide
4-63
Presentation of the income statement under U.S. GAAP follows either aPresentation of the income statement under U.S. GAAP follows either a
single-step or multiple-step format. IFRS does not mention a single-stepsingle-step or multiple-step format. IFRS does not mention a single-step
or multiple-step approach. In addition, under U.S. GAAP, companiesor multiple-step approach. In addition, under U.S. GAAP, companies
must report an item as extraordinary if it is unusual in nature andmust report an item as extraordinary if it is unusual in nature and
infrequent in occurrence. Extraordinary items are prohibited underinfrequent in occurrence. Extraordinary items are prohibited under
IFRS.IFRS.
Under IFRS, companies must classify expenses by either nature orUnder IFRS, companies must classify expenses by either nature or
function. U.S. GAAP does not have that requirement, but the U.S. SECfunction. U.S. GAAP does not have that requirement, but the U.S. SEC
requires a functional presentation.requires a functional presentation.
64. Slide
4-64
IFRS identifies certain minimum items that should be presented on theIFRS identifies certain minimum items that should be presented on the
income statement. U.S. GAAP has no minimum informationincome statement. U.S. GAAP has no minimum information
requirements. However, the SEC rules have more rigorous presentationrequirements. However, the SEC rules have more rigorous presentation
requirements.requirements.
IFRS does not define key measures like income from operations. SECIFRS does not define key measures like income from operations. SEC
regulations define many key measures and provide requirements andregulations define many key measures and provide requirements and
limitations on companies reporting non-U.S. GAAP/IFRS information.limitations on companies reporting non-U.S. GAAP/IFRS information.
U.S. GAAP does not require companies to indicate the amount of netU.S. GAAP does not require companies to indicate the amount of net
income attributable to non-controlling interest.income attributable to non-controlling interest.
U.S. GAAP and IFRS follow the same presentation guidelines forU.S. GAAP and IFRS follow the same presentation guidelines for
discontinued operations, but IFRS defines a discontinued operationdiscontinued operations, but IFRS defines a discontinued operation
more narrowly. Both standard-setters have indicated a willingness tomore narrowly. Both standard-setters have indicated a willingness to
develop a similar definition to be used in the joint project on financialdevelop a similar definition to be used in the joint project on financial
statement presentation.statement presentation.
65. Slide
4-65
Both U.S. GAAP and IFRS have items that are recognized in equity asBoth U.S. GAAP and IFRS have items that are recognized in equity as
part of comprehensive income but do not affect net income. U.S. GAAPpart of comprehensive income but do not affect net income. U.S. GAAP
provides three possible formats for presenting this information: singleprovides three possible formats for presenting this information: single
income statement, combined income statement of comprehensiveincome statement, combined income statement of comprehensive
income, in the statement of shareholders’ equity. Most companies thatincome, in the statement of shareholders’ equity. Most companies that
follow U.S. GAAP present this information in the statement offollow U.S. GAAP present this information in the statement of
shareholders’ equity. IFRS allows a separate statement ofshareholders’ equity. IFRS allows a separate statement of
comprehensive income or a combined statement.comprehensive income or a combined statement.
Under IFRS, revaluation of property, plant, and equipment, andUnder IFRS, revaluation of property, plant, and equipment, and
intangible assets is permitted and is reported as other comprehensiveintangible assets is permitted and is reported as other comprehensive
income. The effect of this difference is that application of IFRS results inincome. The effect of this difference is that application of IFRS results in
more transactions affecting equity but not net income.more transactions affecting equity but not net income.
66. Slide
4-66
The terminology used in the IFRS literature is sometimes different thanThe terminology used in the IFRS literature is sometimes different than
what is used in U.S. GAAP.what is used in U.S. GAAP.